In 2017-18, India imported $21 billion of cellphones and components, and exported just $1.1 billion, for a net sectoral trade deficit of $20 billion. But exports have since soared, while imports have been muted. In March 2023, exports actually exceeded imports by $239 million, according to calculations from commerce ministry data by economist Rahul Chauhan (see graphic). This is a phenomenal reversal.
For the full year 2022-23, the trade deficit in cellphones was $3.6 billion. This looked a huge improvement over $20 billion five years earlier. But none could have expected this to turn into a net surplus by March 2023.
In 2022-23, Apple exported $5 billion of its production of $7 billion. Samsung also exported $4 billion. Apple targets $20 billion by 2024, and aims to shift 25% of its global output in India. Component suppliers — Foxconn, Pegatron and Wistron — are ramping up production in India, for cellphones and other consumer electronics.
This is a success of industrial policy, giving huge subsidies and tariff protection to select companies to create world-beating factories with global scale economies. I have always been sceptical of industrial policy. History shows that governments often fail in picking industrial winners and end up with white elephants and crony capitalists. This is what happened with the Nehru-Indira aim of creating national public sector champions.
However, the Asian Tigers — South Korea, Taiwan and Singapore — successfully used industrial policy from the 1960s onwards to create world-beating companies. They were all autocracies that, unlike India, could crush all opposition to land acquisition, environmental norms or hire’n’fire labour laws. They had small populations and domestic markets, and, hence, focused on export-oriented factories. China later followed the same approach.
Read more at: https://economictimes.indiatimes.com/epaper/delhicapital/2023/may/03/et-edit/the-great-india-mobilisation/articleshow/99944647.cms
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